Auto fleet manager gains from other companies' outsourcing

The corporate downsizing that hurt most metro Detroit businesses has turned out to be a growth opportunity for Corporate Fleet Services Inc.

As companies needed to outsource the management of their vehicles -- or lease rather than own their cars -- the Highland Park-based leasing company saw a chance to grow.

"Our services have been particularly important in the last few years with the recession," said Michael Stevens, vice president and general manager. "Many small businesses couldn't borrow money, and companies became overwhelmed with managing their vehicles."

CFS has several niches, such as defense contractors and manufacturing companies. It also works with human-services businesses, senior assisted living, facilities for the physical or mentally challenged and rehab centers. Although CFS manages fleets of up to 300 vehicles, 150 of the company's 200 clients lease only one or two units, Stevens said.

And while the number of commercial fleets in the nation dropped from 911,000 in 2008 to 779,000 in 2009, the company experienced an 8 percent growth in revenue. Its revenue of $13.7 million grew to $14 million for 2011 and a projected $15 million for 2012.

Formed in 1963 as Bill Snethkamp Leasing Inc. to lease Chrysler vehicles, CFS provides all makes and models and does business in 50 states and Canada, with more than $40 million worth of vehicles on the road.

When Stevens took over management in 1984, he said, he sought a new business model.

"We were looking to differentiate ourselves from our competition," he said. "A chunk of the industry was moving off in a different direction that we see with the banks going now. It started to become a fee business: Write a really low rate and then charge fees for everything."

Stevens said that while the average leasing company would charge upwards of $1,000 on fees alone for one vehicle -- including a $500 acquisition fee, $100 for licensing, $100 for the title, a $300 registration fee and a $300 sales fee -- CFS charges for none of these.

Scott Pattullo, senior vice president of sales, marketing and account management for Des Plaines, Ill.-based Wheels Inc., said fees are less of an issue to a fleet management company when doing business with smaller companies.

"As fleets get larger, the numbers get bigger and clients are much more sensitive to fleet cost," said Pattullo, whose company works with larger companies and fleets of 100 to 15,000 vehicles. "It's a very competitive market, and clients want to know what they're paying for the services. For some clients, funding is more important than service fees."

Neva St. Louis, president of Enhance Inc., a Farmington Hills-based assisted living center with homes throughout Wayne and Oakland counties, said she has worked with CFS for 25 years and leases 40 vehicles from the company, about one per home.

She said Enhance gets quotes for its fleet every two years from different companies, and the lack of fees from CFS played a big part in Enhance keeping CFS services over other businesses.

"We gave a little bit of service to another company about a year ago, and it wasn't nearly what we were used to," St. Louis said. "CFS is just very good in terms of tracking our vehicles. They help us plan and project."

She said Enhance did not downsize its fleet due to the recession but began holding onto vehicles longer or leasing used vehicles.

"As their fleets grow and they want to have more services, they're seeing if they can get that done better by leasing from fleet companies," he said.

Although fleet leasing is holding steady since the recession, Kukal said, companies that don't have a lot of capital or the ability to pay a large amount monthly are holding onto vehicles longer.

While smaller companies increasingly turn to CFS to lease vehicles, Stevens said he tries to avoid concentrations. The business is split evenly among defense contractors, assisted living and health care facilities, original equipment manufacturers, and general service companies, including electrical, cable, energy services, plumbing, and heating and cooling.

"There's too much risk in concentration," he said. "When I took over in 1984, 80 percent of CFS clients were original equipment manufacturers. There had been a recession from 1981 to 1983, and we learned our lesson then. We began diversification the next year."